ByteDance investors said to value TikTok at US$50 billion in takeover bid
- It is unclear whether Zhang Yiming, founder and chief executive of ByteDance, will be satisfied with the offer
- TikTok faces the prospect of US intervention after President Donald Trump and other administration officials said they were considering banning the app
Some investors of TikTok’s parent company ByteDance are seeking to take over the popular social media app after valuing it at about US$50 billion, significantly more than peers such as Snap, according to people familiar with the matter.
Beijing-based ByteDance is considering a range of options for TikTok amid pressure from the United States to relinquish control of the app, which allows users to create short videos with special effects and has become wildly popular with US teenagers. The app’s success has helped turn ByteDance into one of only a handful truly global Chinese conglomerates.
The Committee on Foreign Investment in the United States (CFIUS), an inter-agency panel that reviews deals by foreign acquirers for potential national security risks, has raised concerns about the safety of the personal data that TikTok handles under its Chinese owner, Reuters has previously reported.
Privately held ByteDance has received a proposal from some of its investors, including Sequoia Capital and General Atlantic, to transfer majority ownership of TikTok to them, the sources said. It has also fielded acquisition interest in TikTok from other companies and investment firms, the sources said.
How China’s TikTok video app became a global sensation
The investors’ bid values TikTok at 50 times its projected 2020 revenue of about US$1 billion, according to the sources. By comparison, Snap is valued at 15 times its projected 2020 revenue, at about US$33 billion, according to data provider Refinitiv.
It is unclear whether ByteDance’s founder and chief executive, Zhang Yiming, will be satisfied with the offer. ByteDance executives recently discussed valuation projections for TikTok that exceed US$50 billion, one of the sources said.
TikTok is growing rapidly as it rakes in more cash from advertising, and its management team expects to achieve US$6 billion in revenue in 2021, one of the sources said. ByteDance, which owns other apps including TikTok’s Chinese counterpart, Douyin, has set itself a revenue target for 2020 of about 200 billion yuan (US$28 billion), Reuters has previously reported.
ByteDance was valued at as much as US$140 billion earlier this year when one of its shareholders, Cheetah Mobile, sold a small stake in a private deal, one of the sources said.
If a deal for the whole of TikTok cannot be reached, ByteDance is exploring divesting only TikTok’s US operations, one of the sources said. It is not clear what such a deal would be worth and what ties TikTok in the US would maintain with its global operations.
There is no certainty that ByteDance will agree to any deal, the sources said. It is pushing ahead with structural changes that will further ring-fence the US business of TikTok from its global empire, the sources added. These changes could include a new holding company for TikTok and an independent board, one of the sources said, cautioning that no decision has been made. The company has already separated TikTok operationally from its other apps through dedicated teams.
The sources requested anonymity because the deliberations are confidential.
ByteDance, General Atlantic and Sequoia declined to comment, while Cheetah Mobile and a CFIUS spokeswoman did not respond to requests for comment.
Pompeo says US considering ban on TikTok and other Chinese apps, praises Google, Facebook, Twitter
As relations between the US and China deteriorate over trade, Hong Kong’s autonomy, cybersecurity and the spread of the novel coronavirus, TikTok has emerged as a flashpoint in the dispute between the world’s two largest economies.
Last week, the US Senate Committee on Homeland Security and Governmental Affairs unanimously passed a bill that would bar US federal employees from using TikTok on government-issued devices. It will be taken up by the full Senate for a vote. The House of Representatives has already voted for a similar measure.
President Donald Trump and top administrations officials have said they are considering a broader ban on TikTok and other Chinese-linked apps.
ByteDance acquired Shanghai-based video app Musical.ly app in a US$1 billion deal in 2017 and relaunched it as TikTok the following year. About 70 per cent of the equity capital ByteDance has raised from outside investors has come from the US, according to one of the sources.
In a related development, TikTok chief executive Kevin Mayer said advertisers in the US would be left with few choices and social media competition would dry up without the popular short video app, he wrote in a blog post on Wednesday.
Mayer’s comments come as the chief executives of Amazon.com, Facebook, Apple and Google owner Alphabet are set to appear before US lawmakers on Wednesday to address concerns they have become too dominant in their markets.
TikTok has not been invited to the hearing, but faces the prospect of US intervention after President Donald Trump and other administration officials said they were considering banning the app amid deteriorating relations between Washington and Beijing.
“We believe it is essential to show users, advertisers, creators, and regulators that we are responsible and committed members of the American community that follows US laws,” Mayer, who stepped down as Walt Disney Co’s top streaming executive earlier this year to join TikTok, wrote in the blog post.
TikTok was allowing experts to observe its moderation policies and examine the code that drives its algorithms, Mayer said. He added that the app was on track to create 10,000 new US jobs.
TikTok has also attracted criticism from Facebook chief executive Mark Zuckerberg, who last year accused the app of censoring political protest. TikTok has denied the claim.
“Let’s focus our energies on fair and open competition in service of our consumers, rather than maligning attacks by our competitor – namely, Facebook – disguised as patriotism and designed to put an end to our very presence in the US,” Mayer wrote.
Facebook did not immediately respond to a request for comment.